2 Aug 2012

The battle for green growth

Some people consider the phrase "green growth" to be an oxymoron. Others (like me) see it as an outcome of good economics (i.e., internalizing externalities).

The World Bank has an interesting report on the topic that lists a few barriers to green growth:
  1. Existing stocks of capital goods, intellectual property, culture, etc. create path dependency. The costs and benefits of a move to a "greener" option may be distorted by these stocks, such that suboptimal decisions result.
  2. People consuming for social and/or competitive reasons may do so regardless of costs or greenery (think of teenagers smoking or racing their cars to be cool).
  3. A past of cheap prices on "brown" consumer goods may lead to consumption habits that will persist, even in the face of price changes to reflect "green" choices.
Bottom Line: The shadow of the past lies heavily on present changes in policy that are designed to move us to a better future.